ARLA Propertymark has released details of its written response to a Parliamentary committee investigating the impact of Airbnb-style short lets on the wider rental market - and it pulls no punches on the potential dangers.
Earlier this year the House of Lords Built Environment Committee opened an inquiry into the impact of short-term lettings on housing markets.
In response to claims by some elements of the short let industry that there was no link between short-term let growth and housing shortages, ARLA Propertymark provided its own briefing to the committee in June; this has now been released on the Propertymark website.
It says its concern over the impact of short-term lettings can be summarised in three main points.
“Firstly, tenants are currently struggling to find homes and an unregulated increase in short-term lettings would only make finding a home more difficult. Secondly, we are seeing landlords sell their rental properties and leave the Private Rented Sector. Thirdly, there are few alternatives to people looking for homes outside of the Private Rented Sector. Overall, people are finding it more and more difficult to find a home. With the market strained as it is, any further decrease in the availability of long-term rents will have significant consequences for renters.”
ARLA Propertymark says its research shows of the 23 per cent of landlords who offered short-term tenancies in 2019, 12 per cent did so by changing properties from longer term tenancies to short-term. Extended across the UK’s landlord population, this potentially means 46,000 properties had been taken away from the private rented sector since 2015.
It adds that given the current state of the Private Rented Sector since 2019 “large numbers of landlords switching to the short-term lettings is a likely scenario.”
It says the most cited reason behind landlords planning to reduce or sell portfolios was the raft of existing and promised legal changes.
Propertymark told the Lords committee: “This is reflected in the main reasons why landlords switch to short-term lets: 46 per cent due to the greater flexibility afforded by short-term lets, 37 per cent because regulations on long term lets are too burdensome, 31 per cent because they can charge higher nightly rents.
“This suggests that there are several incentives for landlords to move into the short-term lettings sector. Research published by the University of Manchester found that the average two bed flat in Manchester City Centre and Hulme could generate between 1.7 and 2.9 times the amount of rent that it could through long-term rent. This is with an 80 per centr occupancy rate. Even if legislation caps the number of days landlords can rent out a property for short-term let, short-term lettings can still be more profitable for landlords.”
The trade body goes on to tell the committee of six recommendations to avoid what it calls the “catastrophic implications” of more long term lets switching to short lets. These are:
1. Any legislative changes should ensure that local authorities have appropriate regulatory powers to balance the needs and concerns of their communities with wider economic and tourism interests. This will require localised solutions rather than a ‘one-size-fits-all approach.
2. The government must carefully consider the impact of any new regulation on the private rented sector if it would incentivise landlords to start using their properties for short-term lets, thereby reducing housing supply for local people.
3. The government should consider extending current health and safety requirements as well as tenant protections for short-term lettings.
4. Ensure that there are adequate enforcement procedures in place if day limits are imposed on short-term lets.
5. Any legislation will need to distinguish between one person’s property being used for short-term lets when it is under-utilised and larger commercial landlords renting out entire properties on a full-time basis.
6. Consider introducing limits on short-term letting activities in areas in which there is a demonstrable impact on private rented housing supply.
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Perhaps complete standardisation of safety regulations and taxation across all types of rentals. Get rid of the quirks in the system that overly incentivise short term letting.
This wouldn’t make me return my short let’s to BTL. Only the removal of section 24 would do that. BTL for anyone who needs a mortgage is now a total non starter with interest rates heading so far north. This time next a year a standard BTL interest rate will be circa 5%. When you factor in section 24 if you are a 40% tax payer that becomes the equivalent of 7.5%. How many properties have a yield above 7.5%???? Answer very few. House prices are unlikely to go up much in the next few years meaning anyone owning a BTL in their personal name without a long term fixed rate already will have no alternative than to sell.
The phrase “more incentives for short let’s” is also misleading. It’s not incentives that have led me to Short let’s it’s de-incentives or multiple hurdles in the BTL industry. Remove the hurdles and I’ll go back like a shot. Short let’s are hard work but I can’t make any money in long term let’s anymore (or at least not enough to make it worth the hassle) and I’m not a charity.
This idea of limiting the number of days you can let a short let is also stupid. All it does is push up the prices … have you seen the rates in London now? Which is better for housing 3 properties charging £300 a night for 90 days or 1 property rented out for 270 nights charging £100 night??
The trouble with our government, campaigners and commentators is none of them can do maths!!
Good point Jo. This is about having a level playing field.
Yes Echis but level with other businesses which it isn’t!
This Govt does not listen to anyone who has a view different to their own. LLs have been warning about the impending crisis in housing for a while now but they take no notice in the same way that they are taking no notice of the impending crisis with energy bills :(
To quote Frazer from Dad's Army - "we're all doomed"!
Stop it stop it that’s 6 more things we don’t need we are so over Regulated already what we need is De-legislation.
Deal with the root cause of all the problems that’s causing Landlords to switch or get out altogether making housing & homelessness infinitely worse.
One Problem one Solution Reinstate Section 21 fully now isn’t that simple. People are so full of crap they’d block any toilet.
Spot on Michael!
That's 6 things that they're suggesting are thrown at the short term Airbnb type market.
Haven't landlords been switching to Airbnb style letting because the safety standards are lower, the EPC doesn't matter and the tax treatment is so much more favourable?
Getting rid of Section 24 would make a huge difference. If short term letting is taxed as a business why is long term letting taxed as an investment? With all the additional regulations we now have to comply with long term letting became a business activity a long time ago. Tax us accordingly.
Landlords are switching to short term letting in anticipation of the abolition of Section 21. It is an alternative to selling, for some people.
First and foremost landlords want to retain control of their properties. That is all government needs to know.
I think the safety standards may be largely irrelevant because landlords switching over already have gas safety certificates, electrical installation reports, energy performance certificates, smoke alarms, carbon monoxide detectors, fire doors etc.
EPC C requirement isn't currently an issue, but the tax situation is relevant if you are a borrower.
Ellie - section 24 is only relevant if you're a borrower but landlord tax should concern all of us.
Income from long term rentals is classed as unearned investment income whereas short term holiday lets are classed as a business. Full time landlords without some other source of PAYE or earned income can only pay £2880 into a SIPP each year so miss out on the tax relief that just about everyone else is entitled to.
When taper relief existed it was possibly reasonable to say our properties were our pensions. Now CGT is so much higher for landlords than anyone else it seems to be grossly unfair that we don't have access to the same pension planning as anyone else.
I'm not an expert on tax, but I believe that some landlords have set up a limited company when buying new rental property in order that they would be subject to corporation tax at 19% rather than the higher individual income tax rates. Large number of buy to let companies apparently set up in 2021. However, there is a planned rise in corporation tax in 2023. Not sure if Liz Truss will reverse that.
I think all this is becoming unimportant to many landlords because of the abolition of Section 21 which spells the end of private letting for them.
De-Legislation is the Answer. That Solved the Problems in the 1980 . So it is not Rocket science.
The Reason they will not do it is simple Money.
A Lot of People are making a lot of Money out of the the minefield of Legislation Landlords have to wade through. Read the other Report Landlords fined millions.
The People Raking the Money are not going to be the ones without a Home so why would they care.
Quite right - we can do without more legislation aimed at destroying landlords.
I recall when John Major was elected he claimed he was going to war on red tape
Then he set up several useless quangos to investigate it and ended up just creating even more red tape
We all know on this site that the government are unlikely to listen, and the inevitable homelessness that follows will be blamed on us 😳 . Oh well, let the chips fall where they may.
I put a house on the market. Can't get rid of the tenant. Always has a repair on record for something; I wonder why? And I'm not going through Renters Reform and getting stuck with them forever. It's an EPC grade E property too so more problems ahead... I can see me losing control of MY PROPERTY to some immigrant who's only been here a few years, who lives pretty much totally on benefits (lied about being a financial advisor) and to the the government. No thanks. I'll sell.
The current PRS situation is bad. It's set to get a whole lot worse under renters reform. Then once trapped they will make it even worse. As historically a Tory supporter I'd like to say it would be worse under a Labour government with rent controls etc. But with the current arrogant bunch of left leaning 'levelling up' green Tories (thank god Bojo is going [supposedly]) I do not fear Labour getting in at the next GE. Terrible to say that!
Nick - Sounds a sensible move to sell, in terms of Labour getting in 😱😱 I do fear it… a lot, I will have probably sold up by the time they get in and start their inevitable attack on the PRS, so no great impact on me.
Simon- Totally agree.
It's terrible they want to attack landlords. It's not helping these tenants at all.
It’s not a long term solution for landlords switching over to Airbnbs it won’t be long before the government start imposing the same or worse regulations as the PRS.
And if a labour government get into power we may as well all sell up in the UK and with whatever we are left with after paying the astronomical CGT ..perhaps consider reinvesting overseas in places such as Florida.
i agree Zoe, but if the government thinks that making it impossible to switch from long term lets to short term lets is going to make landlords hand over their properties indefinitely to tenants, they are very much mistaken. That is not going to happen, particularly in London.
I was thinking about Florida. Somewhere outside the UK anyway. I always wanted to manage my own things close by but it seems it is no longer possible.
As you probably know you can get a green card (lawful resident status) through real estate investment in the US. This is what it says on VisaNation:
The foreign investor track has two major programs, namely the Basic Program and the Regional Center Pilot Program. The basic program means you will play an active role in the day-to-day operations of your investment. Regional centers are USCIS-approved organizations where you can invest your capital as a partner and a partial owner. To qualify for either of these two types, you will need an EB-5 investment amount of $1 million in a U.S. business enterprise or $500,000 if the business is located in a Targeted Designated Area (TEA). Your investment must create at least 10 U.S. jobs.
Getting your green card through real estate investment using the EB-5 program can be done in two ways:
1. Invest In a Real Estate-Focused EB-5 Regional Center
Many approved EB-5 Regional Centers deal with real estate and are always keen to have foreign investors on board. The handlers of the programs will do all the groundwork such as reviewing proposed land for construction, land entitlement, development documentation and overseeing the building process.
Some of the lucrative properties these centers invest in include resort hotel developments, student housing, restaurants, office components, senior living home facilities, and shopping centers.
As a foreign investor, if you choose this EB-5 route, you would be granted partial ownership of the project having the opportunity to participate in the cash flow and profit sharing of the business.
2. Buy A U.S. Property to Start Your EB-5 Enterprise
If you would like to play an active role in running your EB-5 investment, another way you can get a green card through real estate investment is to own the real estate on which your business operates. Since the requirement of the creation of 10 full-time employment for U.S. workers must be met, your best bet will be to buy a building to start a new enterprise or invest in an existing business.
This can help you fulfill two requirements at once as you can use the bulk of the investment amount for the purchase of the building and use the remaining part of the money to meet all other new commercial enterprise requirements of EB-5 program including employing the specified number of employees.
To save a substantial amount on their EB-5 investment, foreign investors sometimes buy distressed properties, which can be purchased at a low acquisition cost to start their new commercial enterprise. So long you invest the minimum amount and adhere to the USCIS requirements of the program in the usage of the property, this may be a viable option. However, you should speak with your EB-5 attorney before doing so.
You have to hold the green card for five years to become a US citizen.
I have no practical experience of this at all, so don't know if it is a good idea or not.
And for anyone concerned about inheritance tax, in the US, the estate has to be worth more than 5 million dollars before there is any inheritance tax to pay.
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